Fitch affirms Reliance ratings on strong position

02 March 2007 08:08  [Source: ICIS news]

SINGAPORE (ICIS news)--Fitch affirmed on Friday its BBB- long-term foreign currency and local currency issuer default ratings on Reliance Industries, with a stable outlook.

The rating was based on the Indian company’s dominant position in the domestic petrochemicals sector and its efficient refining operations. 

The ratings agency also affirmed the AAA(ind) given to Reliance’s national long-term issuer rating and the rupee (Rs) 130bn ($2.9bn) non-convertible debenture programme, it said in a statement. 

Fitch noted that the scale of the company’s operations in key product lines and comfortable capital structure supported by robust cash generation from core businesses have contributed to its ratings. 

Reliance is the largest private sector company in India, with its revenue of Rs812bn in fiscal 2006 equivalent to 2.8% of India’s gross domestic product (GDP), and exports accounting for 8% of the country’s exports, Fitch noted. 

The ratings, however, were constrained by a maximum of one notch by India’s country ceiling of BBB-, Fitch said. 

While Reliance’s petrochemical and refining margins are expected to be volatile, Fitch thinks that they will remain strong, as the company has been able to consistently maintain its margins above global benchmarks due to the high complexity of its refinery. 

The Indian major’s recent announcement of a $3bn cracker and petrochemicals unit and issue of equity warrants worth about $3.74bn are expected to cushion the impact on its credit ratios, Fitch said. 

($1 = Rs44.28)

By: Keith Tan Liming
+65 6780 4359

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